For more than a decade the music industry has attributed a massive decline in sales to music piracy. However, in a week where a report from the UK telecoms regulator indicated that piracy has plunged, no industry press releases hit the wire. Perhaps that’s because the effect on sales appears to be non-existent? In fact, the same research shows once again that those who download without permission tend to spend more on music than those who don’t.
The majority of the reports and press releases put out by music industry groups over the past several years can be summarized in a few words: “Piracy is evil and we lose a lot of money because of it.”
On the other side, however, numerous studies have also shown that on average file-sharers spend more money on legal purchases, whether it’s music or box office tickets.
The most logical explanation for this finding is that “pirates” are more engaged than those who don’t share, and that they complement their legal purchases with unauthorized downloads.
The above indicates that music piracy might not be the right scapegoat for the massive losses the industry has suffered since the early 2000s. At least, not the prime reason. This appears to be supported by new data released by the UK telecoms regulator Ofcom last week.
Since last year Ofcom has surveyed the download habits of tens of thousands of Brits. The latest data wave shows that between March and May of this year about 9% of the people in the UK pirated music, with Ofcom signaling a clear downward trend compared to last year.
The estimated number of downloaded tracks in the UK dropped from 301 million last year to 199 million in the latest measurement. In other words, according to Ofcom’s findings a third of all music piracy evaporated in a year.
The number of people who admitted to pirating music during the same period dropped as well, approximately 10% during the same time frame.
This is great news for the music industry, but neither the BPI or IFPI have cheered on the findings in a press release. It might be that they are not convinced by the data, or perhaps they too might have noticed that the unprecedented drop in piracy had virtually no effect on music sales.
While it’s true that streaming services such as Spotify are expanding their user base at a rapid pace, overall sales revenues in the UK are still dropping. While piracy plunged, music sales fell from $1.41 billion in 2011 to $1.33 billion, a hefty 6.1% decrease.
Previously, when music piracy increased various industry groups pointed out that there was a direct correlation with the decline in sales. This argument will be much harder to make now.
Of course, the music industry can point out that 199 million downloads is still very significant, and that the losses might have even been higher if piracy hadn’t declined. That said, it’s clear that unauthorized downloads are not the only problem for the music industry, and that there are other, perhaps more important, factors that explain the continuous losses.
In fact, Ofcom’s study once again shows that not all pirates are cheapskates. Those who consumed a mix of legal and illegal music said they spent the most on music – £95.31 – while those who only consumed music legally totaled £41.40.
Perhaps that explains the recent sales decline?
So what does the music industry have to say about this all? The RIAA (Recording Industry Association of America) says in a recent quote about this:
“We’ve always said there are multiple reasons for the decline of the industry during the past ten years: Competition for the entertainment dollar. Diversification of music consumption and access. But we also think people being able to steal music online is the primary reason. Not the only, but the primary.”
I differ have to differ with the RIAA here. The digital revolution in music has changed the entire industry by altering the consumption habits of music fans. Although piracy could also be a factor, the data we’ve seen thus far suggests that it plays only a minor role, if it has any effect at all.
What do you think has been the major reason for the fall in music company profits? Do you believe they will ever get back to the heyday of the early 90’s?
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